AirAsia’s future in doubt due to coronavirus

The future of top regional budget carrier AirAsia is in “significant doubt” after the collapse in travel demand caused by coronavirus, its auditor warned, sending the airline’s share price tumbling nearly 18 percent on Wednesday.

The aviation industry is facing its biggest-ever crisis due to the pandemic, with airlines worldwide going out of business or laying off huge numbers of staff to stay afloat.

AirAsia, led by colourful chief executive Tony Fernandes, pioneered low-cost air travel across Asia in the early 2000s at a time of growing demand from a fast-emerging middle class.

But on Monday the debt-laden Malaysian airline reported a record quarterly loss of 803 million ringgit ($187 million) for the first three months of the year, after being forced to ground its fleet due to the virus.

Auditor Ernst & Young said Tuesday that global travel restrictions had dented AirAsia’s financial performance, with liabilities exceeding assets by 1.84 billion ringgit.

It noted the “existence of material uncertainties that may cast significant doubt on… the company’s ability to continue as a going concern”, in an unqualified audit opinion statement to the Kuala Lumpur stock exchange.

AirAsia, which flies to over 150 destinations, was already facing stiff competition from other low-cost carriers before the outbreak, and had reported a net loss of 283 million ringgit in 2019.

But the auditor also said AirAsia had “seen positive developments on its business operations” with the gradual lifting of travel restrictions in some countries.